To use gap insurance, you must first have your car insurance company declare your vehicle a total loss due to an accident or theft. Once the primary insurer pays the actual cash value (ACV) of the car, you file a claim with your gap provider to cover the remaining balance (the "gap") between the ACV and your loan/lease payoff amount.
If your vehicle is totaled, your standard auto insurance policy will reimburse you for its current value, which could be less than the amount you owe on the loan. Gap insurance would cover that difference. In the event of a total loss, you must file an auto insurance claim before filing one for gap insurance.
When your loan amount is more than your vehicle is worth, gap insurance coverage pays the difference. For example, if you owe $25,000 on your loan and your car is only worth $20,000, your gap coverage covers the $5,000 gap, minus your deductible.
Q: How do I file a GAP claim? A: Typically, a GAP Insurance claim will be filed on your behalf by your financial institution. Once your financial institution receives the claim check from your auto insurance company, they will then file the GAP Insurance claim.
Gap Cover Claims
Gap insurance doesn't pay when your car isn't totaled, your policy is inactive, or specific exclusions apply. It doesn't cover negative equity, missed payments, or optional add-ons like extended warranties. 14 common scenarios where gap insurance doesn't pay: Car Is Not a Total Loss.
GAP insurance payouts typically take a few weeks to 1-2 months (around 30-45 days is common) after your primary auto insurer declares the car a total loss and you submit all necessary paperwork, with the exact time depending on claim complexity, documentation, and state laws. Delays can occur due to incomplete documents, complex accidents, or waiting on your main insurer's settlement, but prompt submission of paperwork speeds up the process.
Lump Sum Payment: By paying off the gap insurance refund policy in advance, you are then entitled to a refund on the unused portion. Monthly Payments: If you pay your premiums monthly, you won't be able to get a refund on any past months. However, you may get a small refund if you cancel early in the month.
Gap insurance is an optional car insurance coverage that helps pay off your auto loan if your car is totaled or stolen, and you owe more than the car's depreciated value. This coverage, sometimes referred to as loan/lease gap coverage, is only available if you're the original loan or leaseholder on a new vehicle.
In the event your vehicle gets stolen or totaled and you owe more than the vehicle's value at that time, gap insurance will help cover the depreciation amount between what is owed and the vehicle's actual cash value. Here's an example of how gap insurance works if you totaled your car nearly 1 year later.
The main cons of gap insurance are that it's an added cost, potentially expensive if rolled into a loan (paying interest on it), only covers the "gap" on a total loss (no repair coverage), and can be hard to cancel; you might not need it if you have a large down payment or already owe less than the car's value, and it has specific exclusions like missed payments or rental car fees.
Why a GAP Insurance Claim Might Be Denied: Unpacking the Fine Print
GAP insurance is often paid upfront and the purchaser is usually entitled to a refund of the unused portion of the premium if the vehicle is sold or refinanced before the end of the loan term. There are two ways of getting GAP coverage.
Gap insurance will only cover what is left on your loan after an insurance company pays out. In other words, no, it won't cover the down payment you made initially because it wasn't part of the loan amount.
GAP insurance does not apply in the event of engine failure, mechanical malfunctions, owner death, or in cases where extended warranty coverage conflicts. For more insurance information like comprehensive insurance coverage and more, visit Suntrup Automotive Group.
The GAP coverage benefit might not cancel the entire amount you owe at the time of loss. If debt-to-value exceeded 125% or 150% (depending on contract) on the GAP effective date, the GAP coverage benefit will be adjusted by subtracting the amount by which debt-to-value exceeded 125% or 150% (depending on contract).
GAP Insurance does not always pay out. Claims can be declined if your motor insurer does not settle, if policy conditions are not met, or if the vehicle or its use falls outside the policy terms. The most common reasons are explained below.
When you file your gap insurance claim, you need to provide documentation that shows the difference between what you owe on your loan or car lease and what the car was worth when it was stolen or totaled.
A gap insurance refund may be an option for you. While you will not be able to get a refund for your required liability coverage because you will continue to need this coverage even after the loan is paid off, a gap insurance refund may still be available to you.
The typical turnaround for gap claims is 30-45 days, but it depends on how involved your claim is. The check will go directly to pay off your car loan.